Balancing the Books on the Backs of the Poor

With fears of a double-dip recession on the rise, some have questioned whether this is the right time for the federal government to begin drastic and hard cuts. Some have even called for a second round of stimulus to ensure that Canada can steer through these troubling economic waters.

Although the Harper government has no problem spending money, I believe that they will probably ramp up the cuts that have already started. When they do come in full force, we must make sure that we are not balancing the books on the backs of the poor. This doesn't make moral sense and it doesn't make economic sense either.

Because make no mistake, poverty costs us all. It forces up our tax bills, depresses the economy, increases health care bills and breeds alienation and crime.

A recent Ontario study, guided by economists and policy experts such as Don Drummond, Judith Maxwell and James Milway, estimates that poverty costs this country about $7.5 billion dollars every year in health care costs alone and between $8 and $13 billion in lost productivity. All told, they set poverty's bill at over $30 billion annually.

Also, any cuts should be done with a view to the future. A demographic crisis is looming. It may not be felt right now but it will have significant impact on Canadian society and its finances moving forward. A recent report by the Canadian Chamber of Commerce puts this looming demographic challenge in stark terms -- as our population ages and the growth in the working age population slows, we're going to face significant labour shortages. Within 20 years we'll have about half the ratio of people working, paying taxes, contributing to pensions and health care as we do today.

In a report by the Parliamentary Budget Officer, Kevin Page, published a year ago, he states "Slower growth in revenues, combined with increased spending on elderly benefits and health transfers results in explosive increases in the debt-to-GDP ratio over the long term, indicating that the current fiscal structure is not sustainable."

In its report, the Chamber of Commerce also said that in order to address the coming shortages in our labour supply, we need to tap into the underutilized segments of our society -- older people, Aboriginal people, the disabled, and new immigrants.

Those are the very groups, along with lone parents (largely lone mothers), that are most vulnerable to poverty. Turns out the very same groups that are languishing in poverty are the very ones they say we'll need to fill the jobs and pay the taxes in the future.

So here we have the intersection of two of the greatest challenges facing our society -- the ongoing economic costs of poverty and the demographic time bomb of aging.

The good news -- and the tremendous opportunity -- is that we can address both at the same time! Give more people a way out of poverty and we'll help fill the jobs we need filled. Give more people a way out of poverty and we'll save billions of dollars that poverty's costing all of us.

So how do we do this?

Well first we must think very carefully about where we cut. Cutting programs that help the poor survive doesn't make any sense and should be avoided. We also have to start to change our thinking about how to best tackle the poverty and homelessness problem. We have to make the goal of all social policy to help lift people out of poverty not maintain them or in some cases entrap them in poverty which we do now.

We must spend our money wiser. In terms of homelessness, it is actually more expensive to keep someone on the street than to provide supportive affordable housing. As the outgoing Premier of Alberta, Ed Stelmach said an average homeless person costs society roughly $100,000 a year including health costs. The annual cost per person drops to about $35,000 annually if that person is given a long-term home with supports.

We also must have imaginative thinking. A great example of this is a program like Pathways to Education. In Toronto's Regent Park they were instrumental in lowering the high school dropout rate from 56 per cent to 10 per cent and increasing the number of high school graduates going on to post-secondary education from 20 per cent to 80 per cent. We need more programs like that.

Poverty is not benign. It affects us all. It costs us all. We spend a lot of money and don't get the results we should. While there will be transitional costs, overall we don't need to spend more money. Instead we need to spend smarter, more efficiently and effectively.